Surveillance 2.0 – Moving To The Next Level​

With the development of «Prometheus», SER took the next level – embedding latest technology e.g. Artificial Intelligence into their Surveillance Framework. Christian Müller, Head Surveillance & Enforcement, answers questions about the new application.

Hello Christian! As Head Surveillance & Enforcement, you are responsible for the development of the new trade surveillance application «Prometheus». The application is in the final phase of development. The development of such an application is a big project. Can you provide insights that led to this new initiative?

Most trade surveillance teams use run-of-the-mill market surveillance products whose main focus is primarily on quantitative alert generation. Those alerts require extensive attention from our surveillance analysts. As a result, legacy systems do not only impose high cost related to manual alert handling and maintenance, but do also open windows for possible market abuse practices remaining undetected.

Furthermore the current systems is not able to combine personal data with trade data. Since the entry into force of the Financial Market Infrastructure Act (FinfraG) reporting regime, the trading surveillance unit now has at its disposal more information regarding the beneficial owner of a transaction. Thus, the trade data can be linked to the transaction data.

The use of the latest technologies should allow a clear, systemic focus on higher-quality alerts. This will allow trade surveillance specialists to focus even more on the accurate investigations in order to generate real added value.

What are the advantages of this application compared to the software solution used so far?

Legacy trade surveillance systems frequently suffer from a high number of generated alerts, which are often resulting in a high number of false positive warnings. «Prometheus» uses Data Analytics, that is significantly improving the parametrization of surveillance models, thereby reducing false positives and increasing chances of more effectively detecting cases of potential market abuse and insider cases. As a result our analysts can focus their attention to the most suspicious cases supported by «Prometheus» with more detailed information and advanced Key Risk Indicators.

Gaining in efficiency and effectiveness while boosting quality are the most important driving factors in this. «Prometheus» sees us make the move towards becoming a leading global trading surveillance unit: using the latest technological approaches, it ensures that we don’t react to change, but rather that we trigger change ourselves.

What areas of application could you imagine for «Prometheus» outside the topic of trade surveillance?

As a logical first step SIX is currently elaborating how «Prometheus» can be expanded across the group e.g Market operations or BME. On a mid-term basis regulators and other stock exchanges could be target groups for our new Surveillance solution. Even in a modified way «Prometheus» could be used by financial institutions for their Trade Surveillance activities.    

In general and as part of the vision, «Prometheus» could be easily adapted to any kind of exchanges e.g. energy, CO2 Certificate market etc.

When do you expect the final introduction of «Prometheus» at SIX Exchange Regulation AG?

The full implementation of «Prometheus» is scheduled to go live in Q4 2021. Insider detection, which was the first phase of «Prometheus», was successfully launched in Q4 2020.

We intend to become one of the leading Market Surveillance & Enforcement front line regulator by using state of the art technology to protect the good reputation of SIX Swiss Exchange and to assure a fair and efficient market for the trading of securities in Switzerland.

Surveillance & Enforcement (SVE) supervises price formation and the transactions conducted on the trading venue so that insider trading, price and market manipulation and other violations of statutory and regulatory provisions can be detected. In the event of suspected violations of the law or other irregularities, FINMA (Swiss Financial Regulator) or if the violations of the law involve criminal offences, the competent prosecution authority has to be informed (Art. 31 FinfraG). In the event of rule breaches, we initiate sanctions proceedings as determined by our judicial bodies.

SVE uses innovative and first in class surveillance technologies to detect trading irregularities. Any indications of possible breaches are subject to in-depth analysis of the situation and further investigation, as needed. SVE surveillance analysts also systematically investigate suspicions reported by third parties.

The Surveillance & Enforcement department (SVE), which is responsible for trade surveillance within SIX Exchange Regulation (SER), realises another important milestone on its path to becoming one of the leading  market surveillance departments globally . Cutting-edge technologies such as artificial intelligence, big data and a broader data universe are used. Insider Trading, the first module of the newly developed Prometheus application, went live the 1^st September 2020.

Since the entry into force of the Financial Market Infrastructure Act (FMIA) reporting regime, SVE now has at its disposal more information regarding the beneficial owner of a transaction. The linking of trading data and this enhanced transaction data served as the impetus for the development of Surveillance 2.0 and thus also Prometheus - a holistic approach. Using innovative approaches and new technologies such as artificial intelligence, machine learning and big data, an in-house team of specialists collaborated with an external partner to create a powerful tool for tracking and uncovering potential insider trading in Switzerland.

And that’s not all:  First half of 2021 a second module of Prometheus will be rolled out: Market Manipulation.

Surveillance & Enforcement used run-of-the-mill market surveillance products whose main focus is primarily on quantitative alert generation. This method generates a high volume of false positive alerts, which results in a lot of additional workload which has to be handled by the surveillance specialists. The use of the latest technologies will allow a clear, systemic focus on higher-quality alerts. This will allow trade surveillance specialists to concentrate even more on the accurate investigations in order to generate real added value.